Transpacificahttp://transpacifica.net
Tue, 10 Oct 2017 00:14:02 +0000en-UShourly1https://wordpress.org/?v=4.8.2U.S.–China Week: A law enforcement and cybersecurity dialogue full of reiterations, looking beyond WTO at USTR (2017.10.09)http://transpacifica.net/2017/10/u-s-china-week-a-law-enforcement-and-cybersecurity-dialogue-full-of-reiterations-looking-beyond-wto-at-ustr-2017-10-09/
http://transpacifica.net/2017/10/u-s-china-week-a-law-enforcement-and-cybersecurity-dialogue-full-of-reiterations-looking-beyond-wto-at-ustr-2017-10-09/#respondTue, 10 Oct 2017 00:14:02 +0000http://transpacifica.net/?p=2021Welcome to Issue 115 of U.S.–China Week. This edition is slightly abbreviated as I prepare for a week of travel. Relatedly: If you are in Washington, D.C., next week, please consider coming down to New America on Tuesday, Oct. 17, from 1–2:30 p.m. for a discussion on “Digital China: What Are China’s Leaders & Scholars Saying About Their Plans for Cyberspace?” John Costello, Samm Sacks,…

Welcome to Issue 115 of U.S.–China Week. This edition is slightly abbreviated as I prepare for a week of travel. Relatedly: If you are in Washington, D.C., next week, please consider coming down to New America on Tuesday, Oct. 17, from 1–2:30 p.m. for a discussion on “Digital China: What Are China’s Leaders & Scholars Saying About Their Plans for Cyberspace?” John Costello, Samm Sacks, Paul Triolo, Ian Wallace, and I will discuss what Chinese sources are saying and what we might expect to find out on the cyberspace policy front as China’s 19th Party Congress gets under way. RSVP here. Because of travel, next week’s newsletter will likely also be abbreviated or delayed.

Like it or not, the biggest story in U.S.–China relations remains the fact that the U.S. president is (perhaps not systematically, but still thoroughly) undermining his own administration’s diplomatic efforts with regard to North Korea. President Donald Trump tweeted: “Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid hasn’t worked, agreements violated before the ink was dry, making fools of U.S. negotiators. Sorry, but only one thing will work!” The Republican chair of the Senate Foreign Relations Committee, Bob Corker, told NYT, “I know for a fact that every single day at the White House, it’s a situation of trying to contain him.” Trump’s reckless threats could put the United States “on the path to World War III,” Corker said. Corker, who is not running for reelection, seems to have concluded that speaking truth is more important than defending the head of his party. Let’s see if others join him.

Minister of Public Security and State Councilor Guo Shengkun visited Washington for the first “Law Enforcement and Cybersecurity Dialogue” (LE&CD per State and LECD per Justice). According to State, Deputy Secretary of State John Sullivan hosted the dialogue, which was co-chaired by Attorney General Jeff Sessions and Acting Secretary of Homeland Security Elaine Duke.

In the first topic, described in the U.S. outcome list as “repatriation of foreign nationals with final orders of removal,” and in the Chinese list as “非法移民遣返” (illegal immigrant repatriation), the two sides seemed to reiterate a discussion that had been ongoing in the context of DHS-China dialogue. It’s interesting that the Chinese version seemed to reflect a Trump administration focus on undocumented immigrants, while the English used the legally distinct language of a “final order of removal.” (An non-citizen with a green card can be ordered removed, for instance, after certain types of criminal convictions.) The issue here, I believe, is that there is a backlog of Chinese citizens who have been ordered removed for various reasons but who remain in the United States awaiting Chinese government processing for their repatriation.

The related fourth topic is “Fugitives,” something that has been on the agendain the bilateral Joint Liaison Group on Law Enforcement Cooperation (JLG)—a channel that seems likely to have been folded into the new LE&CD.

On cybersecurity, we see essentially a reiteration of already existing understandings. From the U.S. English version: “Both sides will continue their implementation of the consensus reached by the Chinese and American Presidents in 2015 on U.S.-China cybersecurity cooperation, consisting of the five following points: (1) that timely responses should be provided to requests for information and assistance concerning malicious cyber activities; (2) that neither country’s government will conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors; (3) to make common effort to further identify and promote appropriate norms of state behavior in cyberspace within the international community; (4) to maintain a high-level joint dialogue mechanism on fighting cybercrime and related issues; and (5) to enhance law enforcement communication on cyber security incidents and to mutually provide timely responses.”

WSJreported that Sessions confronted the Chinese delegation over allegations that potentially China-linked hackers had targeted the Hudson Institute website. Hudson also postponed or cancelled an event with Guo Wengui, a Chinese billionaire whom the Chinese government views as a fugitive and has been circulating salacious but hard-to-verify allegations of high-level corruption in the Chinese Communist Party.

The State Department briefing on the day of the dialogue was overshadowed by the question of whether Secretary of State Rex Tillerson had called Trump a “moron,” so we don’t get more there.

“A key challenge facing the United States — and other WTO members — is not only to hold China accountable for strict adherence to its WTO obligations, but also to find effective ways to address those government policies and practices that may violate the spirit of the WTO but nevertheless may not fall squarely within existing WTO disciplines,” Acting Assistant U.S. Trade Representative for China Affairs Terrence McCartin said at a hearing, according to Politico. (Reuters attributed virtually the same comment to Assistant USTR Edward Gresser, so one of the two probably goofed.)

Unless there has been a change, USTR’s hearing on the Section 301 investigationannounced in August will take place tomorrow. You can view some public comment submissions, including from key industry groups and, for instance, Scott Kennedy of CSIS here (that is, if regulations.gov loads for you; it’s having trouble for me).

“By JAMES RESTON / WASHINGTON, Oct. 7[, 1967] — Three men now dominate political discussion in the world—President Johnson in the United States, General de Gaulle in Europe, and Mao Tse-tung in Asia. For the moment, what Johnson decides about the war in Vietnam, what de Gaulle thinks about the organization of Europe, and what Mao decides or thinks about the future of Asia command the attention and influence the course of world politics. But only for the moment. They are all in trouble with their own people. They dominate the news but not the deeper trends of history. On the surface they are decisive, but the tides are running against them. … The main issue of the coming generation is not Johnson, de Gaulle and Mao, not Vietnam or the glory of France or the little red book sayings of China’s aging political philosopher, but the maintenance of peace, the danger of racial war between the hungry agricultural nonwhite nations and the affluent industrial white nations, and the danger of war between the races and the classes in the United States and in Latin America. The question is how to get down to these basic issues.”

(Source: The New York Times. This entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com, and he is based in Oakland, California.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

THE PRESIDENT’S MEN?
After Tillerson in China says U.S. has ‘channels open’ to North Korea, Trump says ‘he is wasting his time’

Secretary of State Rex Tillerson said during a trip to Beijing that, with North Korea, “We ask, ‘Would you like to talk?’ We have lines of communications to Pyongyang—we’re not in a dark situation, a blackout. We have a couple, three channels open to Pyongyang.” An NYTreport continued: “‘We can talk to them,’ Mr. Tillerson said at the end of a long day of engaging China’s leadership. ‘We do talk to them.’ When asked whether those channels ran through China, he shook his head. ‘Directly,’ he said. ‘We have our own channels.'” Tillerson had met with President Xi Jinping, State Councilor Yang Jiechi, and Foreign Minister Wang Yi on an accelerated schedule following an aircraft-related delay in Japan. President Donald Trump, for his part, tweeted “I told Rex Tillerson, our wonderful Secretary of State, that he is wasting his time trying to negotiate with Little Rocket Man… …Save your energy Rex, we’ll do what has to be done!”

ANALYSIS: Tillerson may have said more than he intended to when he vaguely revealed the existence of “our own channels” between Washington and Pyongyang, or perhaps he was intentionally sending a deescalatory signal. But it’s clear that Trump undermined the credibility of any such channels through his public statement that Tillerson was “wasting his time” by trying to pursue talks. The president also undermined his emissaries across the government as they make statements from the banal to the strategically calculated. Should anyone take seriously even Tillerson’s pro forma statement while meeting Xi (video and text) that “President Trump is looking forward with great anticipation to the summit here in Beijing”? The talking point from the administration following Trump’s extraordinary undermining of his top diplomat—that this was “good cop, bad cop” posturing—is probably a fabrication. But it’s arguably even more alarming if the White House believes muddying the waters about the U.S. position regarding military conflict with North Korea is going to serve what they believe are U.S. interests.

MEANWHILE: Chairman of the Joint Chiefs of Staff Gen. Joe Dunford said, “If I look out to 2025, and I look at the demographics and the economic situation, I think China probably poses the greatest threat to our nation.” And the new “U.S.–China Social and Cultural Dialogue”—an apparent repackaging of the U.S.–China Consultation on People-to-People Exchange that used to take place alongside the Strategic and Economic Dialogue—held its first meeting in Washington before Tillerson’s trip (U.S. readout, Xinhua English). That leaves the “law enforcement and cybersecurity” dialogue as the only remaining “new” channel that hasn’t yet met since they were announced in April.

TRADE + INVESTMENT
White House China policy review said to focus on trade and economics; Ross returns from China trip; Long arm of CFIUS

Politico reported that “the White House is quietly conducting a comprehensive review of its approach toward China” at the initiative of the National Security Council and National Economic Council. Politico’s sources said the review was to focus on economic issues, with other possible focuses on Chinese investments and national security, industrial policy, cybersecurity, and national security–linked export restrictions. “The report is expected to include hundreds of policy options, ranging in severity,” Politico reported, suggesting that the review may not so much produce a strategy as prepare measures for possible implementation. News of the review came as Commerce Secretary Wilbur Ross returned from a preparatory trip to Beijing, where he met with Premier Li Keqiang, Vice Premier Wang Yang, and NDRC head He Lifeng, according to Reuters. Expressing his views after the China trip, Ross said, “The most important thing is better market access both for companies operating there physically and for companies exporting there.” “I don’t want to give the impression that we made any concessions on the trip,” Ross reportedly said. “We did not, nor did the Chinese side.”

ANALYSIS: While the Politico report on a China policy review is sketchy, it would be a fantastic waste of time to attempt a policy review on China that did not take seriously the Asia-Pacific regional security environment alongside the economic angles. Chinese officials will link the economic and the geopolitical, as will the ties that bind among allies and trade partners across the region. If U.S. strategists fail to make those links, their strategies will either fail or produce untold unintended consequences.

MEANWHILE: Chinese investors seeking to acquire a minority stake in a Europe-based mapping company were spurned by the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign investments for national security concerns. Though CFIUS is generally part of the story when a foreign entity would take a controlling stake, Bloomberg reported, “CFIUS reviews of minority investments aren’t unheard of. The panel last year decided to review China’s Tsinghua Unisplendour Corp.’s plan to buy a 15 percent stake in hard-drive maker Western Digital Corp. Western Digital terminated the deal after CFIUS decided it had jurisdiction over the transaction.” FTreported that the company in the mapping transaction was encouraged to apply directly to Trump.

In a filing at the World Trade Organization, the U.S. government raised concerns about two documents the Chinese government has released that, if put into effect, would make more concrete some of the vague language of the Cybersecurity Law and the National Security Law. The U.S. filing argues that the two documents—Measures on the Security Assessment of Cross-Border Transfer of Personal Information and Important Data, and a draft standard on the same topic—”could have a significant adverse effect on the trade in services, including services supplied through a commercial presence and on a cross-border basis.” Later, the document charges: “the measures would impose special scrutiny, particular procedures, or bans on the cross-border transfer of expansive and loosely-defined categories of data. The result would be to discourage cross-border data transfers and to promote domestic processing and storage. The impact of the measures would fall disproportionately on foreign service suppliers operating in China.” The U.S. document concludes: “We request that China refrain from issuing or implementing final measures until such concerns are addressed.”

ANALYSIS: In June, two colleagues and I translated an essay on these issues by Yanqing Hong, a Peking University researcher who also plays a direct role in formulating Chinese policy in these areas. It’s still well worth a read. Perhaps the most interesting element of the U.S. document is that it does propose alternative methods to achieve some of China’s data security goals: “Many less burdensome options exist to achieve privacy objectives, including compliance with international cross-border privacy frameworks, such as the APEC Cross-Border Privacy Rules System endorsed by China; contractual agreements between network operators and third party recipients; and third-party accreditation.” Asking China to simply not implement its own solution is unlikely to succeed, however. More realistic is a gradual increase in clarity about what activities are to be covered and not covered by various parts of the emerging data protection regime—and lobbying could have real effect in that creeping clarity. As China’s cyberspace regulatory regime develops rapidly, it’s worth noting that foreign firms aren’t the only ones operating under uncertain conditions. Chinese companies too are subject to shifting regulatory winds—just not as much the headwinds at the border.

“WASHINGTON, Sept. 25[, 1967] — Communist China’s test explosion of a hydrogen bomb this summer makes it more urgent than ever for the United States to support its membership in the United Nations, a panel of influential businessmen, scholars and former government officials said today. The panel issued a report recommending membership in the United Nations General Assembly for both Communist China and Nationalist China and, if Peking accepted this arrangement, giving China’s Security Council seat to the Communist regime. The 26-member group, sponsored by the United Nations Association of the United States of America, is headed by Robert V. Roosa, a former Under Secretary of the Treasury, and Frederick S. Beebe, chairman of Newsweek, Ink., and the Washington Post Company. … Charles W. Yost, former deputy chief of the American delegation to the United Nations and a panel member, asserted that the absence of the Peking regime had ‘handicapped’ the international organization dealing with such vital issues as arms control and the Vietnam war. ‘No one thinks it’s going to be easy to even extend the invitation or to bring Peking in on acceptable terms, or even to live with them once they are in,’ said Mr. Yost. ‘Nevertheless, the importance outweighs the difficulties.'”

(Source: The New York Times. This entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com, and he is based in Oakland, California.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

]]>http://transpacifica.net/2017/10/u-s-china-week-trump-undermines-tillerson-on-dprk-wto-filing-on-data-flows-wh-china-policy-under-review-2017-10-02/feed/0U.S.–China Week: Bannon’s Beijing, Trump and Kim, ‘cyber superpower’ strategy (2017.09.25)http://transpacifica.net/2017/09/u-s-china-week-bannons-beijing-trump-and-kim-cyber-superpower-strategy-2017-09-25/
http://transpacifica.net/2017/09/u-s-china-week-bannons-beijing-trump-and-kim-cyber-superpower-strategy-2017-09-25/#respondMon, 25 Sep 2017 22:30:02 +0000http://transpacifica.net/?p=2014Welcome to Issue 114 of U.S.–China Week. At New America today, Elsa Kania, Samm Sacks, Paul Triolo, and I are out with a translation of an important recent essay in Qiushi (PDF version here) on the official rhetoric and strategies for increasing the Chinese government’s power in cyberspace. It’s mostly candy for China tech policy watchers, but it…

Welcome to Issue 114 of U.S.–China Week. At New America today, Elsa Kania, Samm Sacks, Paul Triolo, and I are out with a translation of an important recent essay in Qiushi (PDF version here) on the official rhetoric and strategies for increasing the Chinese government’s power in cyberspace. It’s mostly candy for China tech policy watchers, but it is the best up-to-date one-stop summary of China’s strategies you’ll find, and it also contains significant signaling on the U.S.–China cyberspace dialogue processes. The authors, from a previously unknown unit of the Cyberspace Administration of China, say China should “work with U.S. Internet companies and think tanks to strengthen joint activities and successfully conduct China-U.S. Internet forums and high-level China-U.S. expert meetings on international cyberspace rules, etc.” They also call for work with Russia, Europe, and Belt and Road states. This comes as U.S.–China cyberspace dialogue is stretched across several different channels and at a time when U.S. policy on online issues is murky. In a short introduction, Paul Triolo and I anticipate that President Xi Jinping and colleagues will further push China’s leadership role in global Internet governance.

Steve Bannon, President Donald Trump’s former top strategist until he was removed following a China-directed interview with the liberal American Prospect, made comments in Hong Kong last week that appeared more attention-seeking than newsworthy. This week it emerged in FT reporting that Bannon then went to Beijing and met Politburo member and anti-corruption chief Wang Qishan. That’s newsworthy.

Wang Qishan had supposedly initiated the meeting in early September, FT later reported, and Bannon also hoped he might meet President Xi Jinping, which apparently did not happen. NYTreported that former Goldman Sachs president and Brookings Institution board co-chair John Thornton “helped arrange” the Bannon-Wang meeting.

Numerous observers want this news to tell us something—about Bannon’s continued influence, about Wang Qishan’s chances of remaining in the Party leadership after the 19th Party Congress next month, or about the trajectory of U.S.–China relations leading up to Trump’s November visit.

Hold your horses. Bannon as Trump’s trusted backchannel to Beijing? It’s at least as likely that he’s trying to pass himself off as such as it is to be true. (Recall Henry Kissinger’s trip to Beijing, coinciding with a Trump call with Taiwanese President Tsai Ing-wen that Kissinger probably didn’t see coming.) A Bannon meeting signaling Wang’s career durability? Let’s see what meetings he takes after the Party Congress before extrapolating. Bannon’s “economic war with China” message betwixt the two leaders? Any Bannon role must be viewed in the context of official ties such as Ross’ visit this week, and taking into account that China’s leaders will discount any statement of Trump administration preferences as potentially temporary.

KOREAN PENINSULA
Trump’s ‘Rocket Man’ rhetoric, U.S. jet fly-bys, and debate over whether the United States is at war with North Korea

In his address to the United Nations, Trump said, “The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea. Rocket Man is on a suicide mission for himself and for his regime.” Kim Jong-un responded with an unusual direct attack on Trump, calling him a “dotard.” The U.S. military reportedly flew military aircraft near North Korea. The North Korean foreign minister said to reporters: “Since the United States declared war on our country, we will have every right to make countermeasures, including the right to shoot down United States strategic bombers even when they are not inside the airspace border of our country.” The White House spokesperson then said “We have not declared war on North Korea.” There were plenty of Trump tweets and little discernible strategic cohesion behind them.

ANALYSIS: As Trump emissaries visit Beijing in preparation for his visit there in November (as Commerce Secretary Wilbur Ross was reportedly doing today), consider how the Chinese government’s representatives might be guessing at the relevance, authoritativeness, or permanence of U.S. official statements—given what they know about the immoderate, changing, and uncoordinated nature of the volatile U.S. president’s statements on a matter so grave as reviving the Korean War with nuclear weapons on both sides. If China’s government had the power to single-handedly solve the Korean Peninsula dilemma, one has to imagine current conditions would make doing so an appealing option.

TRADE + INVESTMENT

China has blocked WhatsApp almost completely as of the weekend, NYTreported.

The U.S. International Trade Commission “found that low-cost, imported solar panels from China and other countries have hurt two domestic manufacturers. They are Georgia-based Suniva and Oregon-based SolarWorld,” NPR reported. “China’s Ministry of Commerce called on the United States to “exercise caution” on trade restrictions and rejected the US International Trade Commission’s ruling on Friday that the cheap [solar panel] imports were responsible for the woes of the two companies,” SCMPreported.

A Chinese group that was stopped by Donald Trump from buying a US chip-maker last week has announced a £550m takeover of British chip designer Imagination Technologies,” The Guardianreported.

WSJreported on a $9 billion Chinese effort to gather DNA samples and conduct related research through 2030, with this interesting tidbit for data protection watchers: “Scientists collecting data for the Chinese government haven’t been told where to upload it. Instead, universities are squeezing genetic information—each human’s genetic code takes up gigabytes of storage—on to their own servers.”

AP reported on a four-month crackdown on intellectual property violations, which it identified as “an effort to mollify foreign companies ahead of a visit to Beijing by U.S. President Donald Trump.”

National roll-out for China’s “negative list for foreign investment…will be adopted nationwide as early as 2018,” Xinhua reported.

“HONG KONG, Sept. 20[, 1967] — A yachtsman from Baldwin, L.I., described today how he was at first almost ‘scared to death’ and later almost ‘bored to death’ during a month-long enforced stay in Communist China. He is David J. Steele, 39 years old, who has been supplying manager for Esso Petroleum Company in Saigon for the last four years. Although he was subjected to intensive interrogation during the first week of his detention, Mr. Steele was treated reasonably well by the Chinese and appeared in good health as he discussed his detention at a news conference here today. Mr. Steele sailed for Hong Kong early last month in a 32 1/2-foot trimaran that he built himself in Saigon. On Aug. 17 near Hainan he was intercepted by fishing trawlers. Mr. Steele was forced to board a Chinese trawler and his craft was taken in tow. It later turned over and sank. He was later taken to Canton and arrived by train yesterday.”

(Source: The New York Times. This entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com, and he is based in Oakland, California.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

]]>http://transpacifica.net/2017/09/u-s-china-week-bannons-beijing-trump-and-kim-cyber-superpower-strategy-2017-09-25/feed/0U.S.–China Week: Trump China visit likely Nov., USTR: China threatens trade system, Lattice and the future of CFIUS (2017.09.18)http://transpacifica.net/2017/09/u-s-china-week-trump-china-visit-likely-nov-ustr-china-threatens-trade-system-lattice-and-the-future-of-cfius-2017-09-18/
http://transpacifica.net/2017/09/u-s-china-week-trump-china-visit-likely-nov-ustr-china-threatens-trade-system-lattice-and-the-future-of-cfius-2017-09-18/#respondTue, 19 Sep 2017 00:32:06 +0000http://transpacifica.net/?p=2011Welcome to Issue 113 of U.S.–China Week. As always: Please encourage friends and colleagues to subscribe to U.S.–China Week. Here is the web version of this issue, ideal for sharing on social media, and you can follow me on Twitter at @gwbstr. Please send your comments, quibbles, and suggestions to mail@gwbstr.com.

The Trump administration blocked a $1.3 billion purchase of Lattice Semiconductor by a Chinese government-backed fund, the White House said, because of “the potential transfer of intellectual property to the foreign acquirer, the Chinese government’s role in supporting this transaction, the importance of semiconductor supply chain integrity to the United States Government, and the use of Lattice products by the United States Government.” Lattice and the fund, Canyon Bridge Capital Partners, had appealed directly to President Donald Trump after the interagency Committee on Foreign Investment in the United States (CFIUS), which examines foreign acquisitions for national security concerns, recommended the deal be blocked. WSJreported that Lattice Chief Executive Darin Billerbeck had said “Lattice and Canyon Bridge tried to address all possible national-security issues through an agreement to give the U.S. government control over Lattice’s intellectual property and technology if the tie-up were approved.” A Ministry of Commerce spokesperson said, “Conducting security checks on a sensitive investment is a nation’s legitimate right, but it shouldn’t be used as a protectionist tool.”

RELATED: USTR: China a “threat to the world trading system that is unprecedented.” U.S. Trade Representative Robert Lighthizer said the WTO was not designed to deal with “mercantilism on this scale.” More: “We must demand reciprocity, in home and in international markets. So, expect change, expect new approaches and expect action.” AP, Bloomberg

ANALYSIS: The reporting on the CFIUS and Trump decision to block the Lattice deal leave unclear what specific national security interests they expected would be harmed if this acquisition had gone through. Some in the United States see it as a national priority to maintain a U.S. edge in the semiconductor industry, and China’s government has made no secret of its efforts to develop a world-leading chip industry. Have CFIUS and Trump judged that Chinese ownership of Lattice would have harmed U.S. national security directly, or was their reasoning more indirect—that Chinese government-supported ventures should not be allowed to acquire assets in this “strategic” industry? As we await a debate over changes to CFIUS that could include economic security as a factor in evaluating transactions, this is something to keep an eye on. Three academics writing at WaPo believe it’s already more complicated than pure national security. And we’ll have another test case soon as Alibaba-linked Ant Financial prepares to resubmit its $1.2 billion acquisition of MoneyGram for CFIUS approval after no verdict was reached during its first 75-day review period.

With a Trump visit to China before the end of 2017 a longstanding element in Chinese talking points since the President Xi Jinping visited Trump in Florida in April, reports are emerging that Trump will visit China in November—one of the known possibilities since the visit could be combined with the Asia-Pacific Economic Cooperation (APEC) meeting in Vietnam and the Association of Southeast Asian Nations (ASEAN) meetings in the Philippines.

A Chinese readout from a Trump-Xi phone call Monday reiterated preparations for a “state visit” this year.

State Councilor Yang Jiechi met with Secretary of State Rex Tillerson (MFA readout). The next day, he met with National Security Adviser H. R. McMaster and Trump adviser and son-in-law Jared Kushner, and a Chinese readout said they discussed the Trump China visit.

A U.S. Congressional delegation including representatives of the U.S.–China Working Group met with Vice Foreign Minister Zheng Zeguang in Beijing.

ANALYSIS: Keeping an eye on the negative space: In the Chinese government’s reports about Yang’s meeting with Tillerson, it mentioned the four-pillared dialogue mechanism framed in Florida in April. What it didn’t mention was when the first meeting of the “law enforcement and cybersecurity” pillar might occur. Does the U.S. government have positions it would take into such a meeting?

Trump warned that the newest round of UN sanctions against North Korea were “nothing compared to ultimately what will have to happen,” and House Foreign Affairs Committee Chair Ed Royce said the U.S. government “should target ‘major Chinese banks doing business with North Korea,'” FT‘s Gabriel Wildau reported. He added: “For China, much would depend on how U.S. authorities calibrate their action. While the U.S. assets of China’s six largest banks comprise only 1 per cent of their global total, a full shutdown of access to the U.S. would have an outsized impact. … The central role of the U.S. dollar in global trade and investment requires foreign banks to clear payments through the U.S., even if they are doing business elsewhere. That requires a dollar clearing license from U.S. authorities.”

“China will implement all United Nations Security Council resolutions, ‘no more, no less,’ Cui Tiankai, China’s ambassador to the U.S., told reporters at a briefing in Washington when asked if China would cut oil shipments,” according to Bloomberg.

Oh yes, and North Korea conducted another missile test, sending a rocket over Japan. According to FT, McMaster said “We’ve been kicking the can down the road, and we’re out of road. There is a military option. It’s not what we’d prefer to do. We call on everyone to do everything we can to address this global problem short of war.” And South Korean President Moon Jae-in said, “Dialogue is impossible in a situation like this.”

“An emerging regionalism in Asia, backed by the power of the United States, will shape the economic development and military security of the Pacific area, in the view of former Vice President Richard M. Nixon. Mr. Nixon, a leading possibility for the 1968 Republican Presidential Nomination, has been a frequent traveler in Asia. He discussed the region’s future in an article entitled ‘Asia After Vietnam‘ in the autumn issue of Foreign Affairs quarterly. … Mr. Nixon suggested that the Asian and Pacific Council could become the foundation for this kind of security system. Present council members are South Korea, Japan, Taiwan, Thailand, Malaysia, South Vietnam, the Philippines, Australia and New Zealand. The council was organized for cultural and economic cooperation, but Mr. Nixon wrote that ‘the solidifying awareness of China’s threat should make it possible to develop it into an alliance actively dedicated to concerting whatever efforts might be necessary to maintain the security of the region.’ … ‘All around the rim of China,’ he wrote, ‘nations are becoming Western without ceasing to be Asian.'”

(Source: The New York Times. This entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com, and he is based in Oakland, California.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

NORTH KOREA
Major Chinese banks ban new North Korean accounts as UN Security Council to vote on ‘watered-down’ U.S. resolution

FTreported that “branches of [China’s big five banks] in China’s north-eastern border towns, where trade with North Korea is concentrated, said they had been instructed to stop opening new bank accounts for North Korean individuals or companies. Branches of three of the banks said they were in the process of cleaning out existing accounts, while the remainder did not comment on procedures for existing accounts. Although some bank branches said they had received notice of the freeze on North Korean accounts last month, others said they had been told as early as January.” Still, sources told FT many transactions use accounts belonging to Chinese nationals living in North Korea. The UN Security Council (UNSC) meanwhile was reportedly expected to vote today on new sanctions on North Korea in a resolution based on a U.S. draft but “weakened, apparently to placate Russia and China,” Reuters reported. “It no longer proposes blacklisting Kim and relaxes sanctions earlier proposed on oil and gas, a draft reviewed by Reuters shows. It still proposes a ban on textile exports.” Earlier, Reuters reported the UNSC was considering a U.S. proposal to freeze assets and ban travel for North Korean leader Kim Jong-un, as well as to impose an oil embargo on North Korea. President Donald Trump, in a press conference, said, “Military action would certainly be an option. Is it inevitable? Nothing’s inevitable.” As expected last week, Trump and President Xi Jinping held a phone call in which a White House readout said North Korea’s nuclear test was the topic.

THE PRESIDENT’S MEN
Tillerson said to be quietly working with China on Korean situation; Rumored ‘Javanka’ Beijing trip ‘cancelled’

In an unsourced “opinion” piece thick with phrases like “appears to” and “seems to,” WaPo‘s David Ignatius wrote that Secretary of State Rex Tillerson has made quiet efforts with Chinese counterparts, aiming to build a cooperative approach to the North Korea situation. “Tillerson wants China standing behind Kim at the negotiating table, with its hands figuratively at Kim’s throat,” Ignatius wrote. One of the article’s most remarkable claims was that: “The Sino-American strategic dialogue about North Korea has been far more extensive than either country acknowledges. They’ve discussed joint efforts to stabilize the Korean Peninsula, including Chinese actions to secure nuclear weapons if the regime collapses.” / ANALYSIS: Contingencies for a North Korean collapse are a long-acknowledged barrier in U.S.–China talks over the Korean Peninsula, so if they have happened it would be both a big deal and no surprise that they’d been kept quiet. Yet Ignatius offers no sourcing or details of who was allegedly at the table in such “Sino-American” dialogue, and Tillerson’s credibility as representative of the U.S. government is questionable at best under a president who remains vocally fickle.

A rumored visit to Beijing by Trump son-in-law Jared Kushner and daughter Ivanka Trump (“Javanka”), both White House advisers, was cancelled, The Guardianreported. Trump administration officials reportedly said that since no visit had been scheduled, no visit was cancelled—a line Bill Bishop called “BS… They were definitely talking about it.” NYTreported that Kushner’s “involvement in China has waned; he did not accept an invitation from the Chinese to go to Beijing this month for a visit that some expected would be in preparation for Mr. Trump’s state visit in November.” / ANALYSIS: If Chinese officials believed they had a consistent line to Trump through “Javanka,” they were no doubt disappointed. I suspect the Chinese government approach to the Trump administration is more diversified than a focus on Tillerson or Kushner would suggest. This doesn’t mean, however, that Chinese officials would not prefer to work with a “point person” for China ties as discussed in the NYT piece. On the U.S. side, a “diversified” approach toward policy in the Asia-Pacific is a charitable way to put it.

CYBERSPACE + TECHNOLOGY

Facebook is hunting for office space in Shanghai, NYTreported, in part to help manage its hardware development efforts. The company also hired William Shuai away from LinkedIn to help manage government relations, WSJreported. Before LinkedIn, which is relatively successful in China for a foreign social media platform (perhaps as a function of controversial decisions the company made regarding censorship), Shuai worked at Baidu and the government’s National Development and Reform Commission.

Apple is being sued in two collective action antitrust lawsuits brought by China-based firms on behalf of developers unhappy with Apple removal of apps from its App Store, FTreported. The research firm ASO 100 reportedly said more than 1 million Chinese apps were removed from the store this year—a number Apple disputes despite not offering its own number.

Sina-backed Chinese startup Tusimple “plans to test a fleet of self-driving trucks in Arizona and Shanghai next year,” Bloomberg reported.

Google and Xiaomi plan to partner with a new device for the India market under the Android One brand, Bloomberg reported.

THE LONG ARM
Chinese billionaire Guo Wengui applies for political asylum in the United States

NYTreported: “The billionaire, Guo Wengui, who is in the United States on a tourist visa that expires later this year, is seeking asylum status because his public charges against Chinese officials have made him ‘a political opponent of the Chinese regime,’ Thomas Ragland, a Washington-based lawyer representing him, said in a telephone interview late Wednesday. Asylum — even a pending asylum application — would give Mr. Guo more protection because he could stay in the United States while the application was being considered, a process that can take years, Mr. Ragland said. ‘Asylum offers a level of protection that is different from having a visa status,’ Mr. Ragland said. ‘Visas can be canceled or revoked.'” China’s government considers Guo a fugitive, reportedly resulting in an Interpol “red notice” for him back in April.

“When it was announced in Paris some months ago that the 23-year-old great-granddaughter of Georges Auguste Escoffler was producing a book on Chinese cooking, there was scarcely an eyebrow raised. If the descendent of the world’s most celebrated French chef was concerning herself with ‘the best in Chinese food,’ she was merely following a trend that is to all appearances international. Chinese cookbook sales may someday surpass the sales of the sayings of Chairman Mao in this country. New Yorkers, who once contented themselves with menus largely dedicated to chop suey and chow mein, now flock to Chinatown restaurants and casually commandeer such exotics as shredded chicken and abalone, vegetables with tree ears and sea slugs. They speak knowingly of the shades of difference between various schools of Chinese cooking—including Cantonese, Mandarin, Szechuan and Shanghai—and the wok, the traditional cooling utensil of Chinese cooks, is no longer a novelty in American kitchens. … There are scores of reasons for this upsurge of interest in Chinese cooking. It has always been, of course, one of the ultimate cuisines of the world, matched, perhaps, only by that of the French. Chinese culture is, of course, the oldest continuous civilization in the world, dating back 4,000 years, and the art of Chinese cooking is said to be equally long-lived. … Chinese cooking is not so difficult as many people seem to believe. One New Yorker recently said, ‘In order to make some of those recipes, you have to have the whole damn family chopping for hours.’ It simply isn’t true.”

(Source: The New York Times. This entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com, and he is based in Oakland, California.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

North Korea conducted its 6th and most powerful nuclear test, and reports said it may be preparing for an intercontinental ballistic missile test. Following the nuclear test, President Donald Trump said on Twitter that the United States is considering “stopping all trade with any country doing business with North Korea.” A Foreign Ministry spokesperson called the tweet “unacceptable,” a comment apparently missing from published transcripts. Ambassador to the United Nations Nikki Haley said “the time has come to exhaust all of our diplomatic means, before it’s too late” and rejected China’s “freeze-for-freeze” proposal (reiterated after the test) as “insulting.” NYTreported that Trump and President Xi Jinping would likely speak about a U.S. proposal to cutoff of oil to North Korea on a call the U.S. government sought to arrange. / Lyle Goldstein offers a summary of recent Chinese scholarly opinion on the Korean Peninsula dilemma. / In non-Korea nuclear cooperationnews, Science Magazinereported on U.S.–China technical cooperation on removing highly enriched uranium from a reactor in Ghana.

ANALYSIS: At first glance, it would seem North Korea’s nuclear test changes no fundamentals given the ossified positions of the key players here, except to increase the intensity on several friction points. This is true to some extent, but the Trump factor means U.S. disagreements with China and alliances with South Korea and Japan are not actually so stable. Indeed, Trump and his administration’s erratic behavior and inconsistent statements threaten to push those ossified positions to a breaking point where war is far less unlikely. If the U.S. government wishes to pressure China to behave more harshly toward Kim Jong-un’s regime, it undermines itself by threatening to halt all trade while meanwhile floating a more specific oil embargo. If the U.S. government wishes to demonstrate international resolve to eventually eliminate North Korea’s nuclear weapons capability, it undermines itself with reports that Trump is preparing to pull out of the U.S.–Korea Free Trade Agreement.

SOUTH CHINA SEA
U.S. said to establish schedule for ‘freedom of navigation’ operations in South China Sea

WSJreported: “The Pentagon for the first time has set a schedule of naval patrols in the South China Sea … The U.S. Pacific Command has developed a plan to conduct so-called freedom-of-navigation operations two to three times over the next few months, according to several U.S. officials. … [Setting a schedule] may help blunt Beijing’s argument that the patrols amount to a destabilizing provocation each time they occur, U.S. officials said. … In keeping with policies against announcing military operations before they occur, officials declined to disclose where and when they would occur.” Meanwhile…

Tuan Pham, a U.S. Navy officer writing in his own name, has a good two-part series (1, 2) at The Diplomat arguing in part: “America has had several setbacks, but has not lost the SCS yet. The SCS is a fluid environment that makes any recalibrations transitory. The strategic shift in China’s favor – change in Philippine foreign policy, Manila and Washington’s failure to capitalize on the arbitral tribunal ruling, ASEAN under Manila’s chairmanship, warming relations between Beijing and Bangkok, closer Chinese ties with Laos and Cambodia, Trans-Pacific Partnership withdrawal, inclusion of the RMB in the International Monetary Fund’s Special Drawing Rights basket, and rise of the Chinese economy to second largest in the world – is not permanent.” Part two examines “ways and means the United States can regain the strategic initiative, recover the high ground of regional influence, and stave off losing in the SCS.”

ANALYSIS: Establishing a schedule for U.S. military demonstrations of U.S. opinions regarding international maritime law in the South China Sea does little to change the situation there. The implied (though not fully reported and not certain) difference would be to remove the National Security Council and the interagency process from decisions about moving forward with one or another operation. The upside of this is to emphasize that the Freedom of Navigation Program is separate from other diplomatic or political tides; the downside is that unless the Department of Defense includes political sensitivities in its scheduling, an operation could occur at a time when it might undermine other priorities. Regardless, FON operations do little or nothing to alter the evolving power balance in the South China Sea, and they are arguably targeted at maintaining a “status quo” that has long since passed into history.

FTreported that Trump dismissed a Chinese offer to lower steel output: “One week after the July G20 summit in Hamburg, at which Mr Trump criticised China for flooding the world market with cheap steel, Beijing proposed cutting steel overcapacity by 150m tonnes by 2022. But Mr Trump twice rejected the deal, according to several people familiar with the internal debate. The offer came the week before US and Chinese officials held a high-level economic dialogue that had been set up by Mr Trump and Chinese president Xi Jinping in April. Wilbur Ross, US commerce secretary, endorsed the deal and brought it to Mr Trump, but the president rejected the proposal.” Trump’s veto reportedly came amidst his hopes to impose tariffs, paralleling last issue‘s opening rumors, and left Ross to return to Vice Premier Wang Yang with a no-go. This reportedly contributed to the lack of a press conference or joint outcomes from the Comprehensive Economic Dialogue.

ANALYSIS: Steel appears to be on the back-burner for the U.S. government in its efforts to develop China trade policy. For now, those advocating for showy new measures against China may be looking to the U.S. Trade Representative’s investigation into Chinese trade and investment practices in tech and intellectual property. That investigation may conclude as soon as this fall. (The last round of comments listed in the original hearing schedule were to be due Oct. 22, and a decision could be made soon thereafter.) If USTR, as expected, finds China’s practices in violation, the U.S. government turns to “remedies,” which could range widely—potentially satiating those calling for “tariffs.” But that would still leave the steel and aluminum interests waiting. One question to ask about the reported Chinese offer to cut steel overcapacity is whether such cuts do anything above what China already has plans to do for domestic reasons.

FTreported that Google is hiring for artificial intelligence and machine learning positions in Beijing: “Google hinted in May, at an AI summit near Shanghai, that it was looking to set up its first China-based AI research team.” Bloomberg noted that Google’s careers site listed several different types of positions, including AI/ML jobs. / ANALYSIS: I don’t believe it’s entirely new for Google to be hiring engineering talent in China despite many of its products being blocked, but the Chinese government’s emphasis on in-country R&D teams among requirements for certain foreign company involvement in China makes the AI/ML listings notable. The State Council’s “Next Generation Artificial Intelligence Development Plan” (which we translated here) also seeks to: “Encourage foreign AI enterprises and research institutes to establish research and development centers in China.”

Apple now accepts WeChat Pay, Tencent’s mobile payment platform, for transactions on its App Store and Apple Music. Apple already supported Alibaba’s Alipay beginning in November 2016, Technode reported. / Above Avalon has an in-depth analysis of Apple’s market position in China, including a section probing the narrative that WeChat is Apple’s main rival there.

#USChinaWeek1967
‘Soviet Says Steps by China Help U.S.: Peking Policies Blamed for American Gains in Asia’

“MOSCOW, Aug. 30[, 1967] — The Soviet Government newspaper Izvestia accused the Chinese Communist leadership today of making possible a number of American advances in Southeast Asia. This view, expressed in a long article by an authoritative commentator, Vikenty Matveyev, may indicate a significant shift in emphasis in the mounting Soviet propaganda attacks against Peking. … ‘For nearly 10 years after the Geneva conference, the United States refrained from large-scale armed intervention in Vietnam,’ Mr. Matveyev wrote. ‘It began only when the group of Mao Tse-tung announced for all to hear that it flatly rejected the proposals of the Communist Party of the Soviet Union and other Communist parties for unity of action in the struggle against imperialist aggression and started following its own narrowly nationalist, great-power, anti-Soviet course.’ … Among other American advances charged to China’s responsibility, the Soviet Government organ cited a strengthening of American positions in India and Japan, Indonesia’s take-over by right-wing military men, and the recent formation of a grouping linking Indonesia, the Philippines, Thailand, Malaysia and Singapore.”

(Source: The New York Times. This entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com, and he is based in Oakland, California.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

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http://transpacifica.net/2017/08/u-s-china-week-trump-wanted-tariffs-a-charge-of-accommodation-at-state-2017-08-28/#respondMon, 28 Aug 2017 23:13:10 +0000http://transpacifica.net/?p=2001Welcome to Issue 110 of U.S.–China Week. Axios reported that President Donald Trump, in an Oval Office meeting before signing the order that instructed the U.S. Trade Representative to consider launching the Section 301 investigation targeting China, expressed displeasure with the nature of the action he was about take. If the Axios source is to be believed, Trump said: “For the…

Welcome to Issue 110 of U.S.–China Week. Axios reported that President Donald Trump, in an Oval Office meeting before signing the order that instructed the U.S. Trade Representative to consider launching the Section 301 investigation targeting China, expressed displeasure with the nature of the action he was about take. If the Axios source is to be believed, Trump said: “For the last six months, this same group of geniuses comes in here all the time and I tell them, ‘Tariffs. I want tariffs.’ And what do they do? They bring me [intellectual property]. I can’t put a tariff on IP.” Shortly after, Steve Bannon (who was in the meeting) was fired, and USTR announced an apparently pre-baked decision to investigate Chinese trade and investment practices on intellectual property. That’s all quite juicy, if true, but it’s anyone’s guess what it portends for the future. It would be a mistake, though, to assume that Bannon’s departure is a strong indication that the administration will move away from economic nationalism. Some more commentary and news in brief form follows.

TECHNOLOGY + CYBERSPACE

At Lawfare and in an accompanying Hoover Institution paper, Julian Ku argued that because the Chinese and U.S. governments hold very different views on pertinent international law questions, “I am not sure that pressuring China to ‘accept international law’ on cyber warfare will advance U.S. interests. China could easily use its own reading of international law to attempt to restrict and isolate the U.S among other states and in global public opinion.”

THE A-WORD
Ratner blasts State Dept. ‘accommodationist impulse’ on China, but the problem is much broader

“What we have seen over the last several months is not just a series of random, off the cuff remarks, but instead a State Department deliberately unwilling to criticize China,” wrote Ely Ratner, a former Obama White House adviser now at CFR. He continued: “This has to stop. It has to stop because the State Department is giving Beijing a green light to bully Taiwan, further suppress Hong Kong, and push toward its goal of controlling the South China Sea. It has to stop because the State Department is generating serious concerns throughout the region about the credibility of America’s commitment to Asia and its willingness to push back on Chinese assertiveness.” Ratner wrote that he is unsure why the State Department appears reluctant to talk tougher on China, but he suggested explanations ranging from simple inexperience to Chinese government capture of Trump son-in-law and White House adviser Jared Kushner. Ratner’s proposed remedy was for National Security Advisor H.R. McMaster and Secretary of Defense James Mattis to “weigh in more actively on China issues.”

ANALYSIS: Ratner has a point here, but it is undermined by a focus on the State Department’s rhetoric in specific, rather than the administration’s approach to China more generally. There is indeed real harm to U.S. interests in regional security and respect for human rights when the U.S. government noticeably retreats from its earlier pattern of statements. But the root of the problem lies not with a strange series of statements (or absences thereof) coming from the State Department. Instead, the problem stems from the capricious, conflicting, and self-defeating behavior emanating from the top of the administration, and from the indication that the Trump administration is willing to trade one interest for another, rather than pragmatically advocating for the United States on all fronts. At the risk of being labeled with the “A-word” myself, I also think it’s important to note that when commentators criticize policies as “accommodationist,” they are employing a form of innuendo that connects to 20th century rhetoric about “appeasement.” This kind of name-calling detracts from the overall argument while also ignoring the fact that successful, strong U.S. policy would, yes, accommodate some Chinese government concerns where doing so is in the U.S. interest. I’m not arguing that it is in U.S. interests to pull punches in diplomatic statements, but making “accommodation” a swear word paints pragmatic policy with the same brush as actual ruinous capitulation on crucial issues.

“WASHINGTON, Aug. 21[, 1967] — The Pentagon said that two United States Navy jets were shot down today over Communist China after having veered off course. The official Chinese press agency, Hsinhua, said the planes had ‘flagrantly intruded’ into Chinese air space in ‘an act of deliberate war provocation’ and been downed over the Kwangsi Chuang Autonomous Region by the Chinese Air Force. Hsinhua said one of the pilots had been captured. Each plane carried a two-main crew. … The Pentagon said the Navy jets had gone off course after having completed a bombing run near Hanoi in which they encountered heavy fire from antiaircraft guns and ‘several’ surface-to-air missiles. … The loss of the planes over China, coming atop Congressional criticism that a recent decision to bomb closer to the Chinese border might provoke Peking into entering the war, is expected to intensify attacks on the Administration’s bombing policy.'”

(Source: The New York Times. This entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com, and he is based in Oakland, California.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

]]>http://transpacifica.net/2017/08/u-s-china-week-trump-wanted-tariffs-a-charge-of-accommodation-at-state-2017-08-28/feed/0U.S.–China Week: Trump’s tech and IP trade investigation, Bannon out after China interview, North Korea (2017.08.21)http://transpacifica.net/2017/08/u-s-china-week-trumps-tech-and-ip-trade-investigation-bannon-out-after-china-interview-north-korea-2017-08-21/
http://transpacifica.net/2017/08/u-s-china-week-trumps-tech-and-ip-trade-investigation-bannon-out-after-china-interview-north-korea-2017-08-21/#respondMon, 21 Aug 2017 23:48:35 +0000http://transpacifica.net/?p=1995Welcome to Issue 109 of U.S.–China Week. As always: Please encourage friends and colleagues to subscribe to U.S.–China Week. Here is the web version of this issue, ideal for sharing on social media, and you can follow me on Twitter at @gwbstr. Please send your comments, quibbles, and suggestions to mail@gwbstr.com.

Within a week after President Donald Trump ordered a review of whether to investigate Chinese trade and investment practices under Section 301 of the 1974 Trade Act, U.S. Trade Representative Robert Lighthizer announced that the review was followed by a decision to open an investigation. The 10-page official documenton the initiation of the investigation defines its scope as “to determine whether acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation are actionable” and announced a comment period lasting through Sept. 28 and a public hearing Oct. 10. In announcing an investigation, USTR directly called out: “China’s ‘Made in China 2025’ industrial plan,” “joint venture requirements,” “vague and unwritten rules,” “unfair[]” reported government instructions or support for strategic investments or acquisitions, and other grievances.

Former Congressman and WTO judge James Bacchus wrote in a WSJ op-ed: “Before taking unilateral action in violation of international law, the Trump administration should bring cases against China at the [WTO]. It stands a good chance of winning precedent-setting judgments, which the WTO would enforce through economic sanctions. … Some in the Trump administration evidently assume that protectionist Chinese actions aren’t covered by WTO rules, but a lot of them are. …If the U.S. insists on acting unilaterally under the Trade Act, the Chinese are correct that this would break WTO rules. … Before the U.S. damages the trading system by acting unilaterally, White House lawyers should read the fine print of the rule book.” China’s government reacted in a predictably negative way, with a Ministry of Commerce statement promising to “resolutely defend China’s lawful interests” (Xinhua Chinese).

ANALYSIS: The framing for the USTR investigation, which clearly was decided well before Trump’s order to consider investigating, leaves the U.S. government with a wide range of potential choices. In essence, the Trump administration has just threatened to take unspecified actions against Chinese practices—actions that are unilateral, use the president’s discretion, and may substitute for measures that could be taken at the WTO. Still, there appears to be a political consensus that WTO tools alone are not commensurate with the economic challenge from China’s allegedly unfair competitive practices. Even WTO champions recognize the need to update the international trade regime—though their preferred course for doing so was frustrated with the abandoning of the Trans-Pacific Partnership.

Though the investigation resonates with some of Trump’s political rhetoric about unfair competition from China, it notably does not target industries closely connected with factory, mining, or mill jobs. (See next item for a suggestion that those actions could be next.) One question is how this move interacts with a broad, bipartisan consensus that more “reciprocity” is called for in China trade and investment relations. Is a 301 investigation a reciprocal move reflecting Chinese practices that also lay outside the WTO framework, or might it turn out to be one move in a tit-for-tat downward spiral with unknown limits? In both a reciprocity model and tit-for-tat interactions, the result of the two sides’ moves will depend on how their leverage lines up with their objectives.

Steve Bannon—one of the most darkly controversial figures in Trump’s orbit who is famous for provocative media strategy, economic populism, and at minimum a symbiosis with white nationalism—was reportedly forced out of his position as chief White House strategist. Though Bannon’s exit coincided with immense blowback from the president’s own failure to clearly condemn white nationalists and others on the radical right, it is likely (perhaps also) related to Bannon’s phone call to American Prospect cofounder Robert Kuttner in which he undermined the administration’s position on North Korea and outlined his vision of China policy. Though some suspect Bannon thought he was off the record, Kuttner reported the conversation, saying “the question of whether the phone call was on or off the record never came up.”

“We’re at economic war with China,” Bannon said, according to the report. He argued for stronger measures against China economically and against withholding pressure on China in hopes of greater cooperation on the North Korean nuclear and missile program. The quote that most obviously broke with administration policy was: “There’s no military solution [to North Korea’s nuclear threats], forget it. Until somebody solves the part of the equation that shows me that ten million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about, there’s no military solution here, they got us.” Kuttner reported that Bannon’s plan to “be maniacally focused on [the economic war with China]” included a 301 investigation on technology transfer, followed by further 301 actions on steel and aluminum dumping. Bannon said other members of the administration were “wetting themselves” over the 301 investigation. Not only were other officials unhappy, he claimed, but he said he was changing Asia officials at the Pentagon and was ousting Acting Assistant Secretary of State for East Asian and Pacific Affairs Susan Thornton, a diplomat who has been acting in that position since her Obama-era predecessor under whom she worked departed.

ANALYSIS: The big question for U.S.–China relations is what Bannon’s departure means for U.S. policy toward Asia. Josh Rogin stated well a common view that the part of the administration that wants to act strongly against China on economic issues has lost a high-level champion in the White House, and that more cautious remaining figures could gain strength. An FT report argued the opposite side. While terms like “economic war” might lose currency among White House decision makers, it will be hard to tell what difference Bannon’s departure really makes, and the answer may hinge on whether his professed influence was really ever so great. Even an influential adviser would have trouble assembling on their own the type of action Bannon claimed as his own agenda. Bannon’s voice is surely unusually loud, but it may well have been more a reflection than a driver of the administrations tendencies.

KOREAN PENINSULA
Top U.S. general in China for mil-mil cooperation; U.S.-South Korea war games; Tweaking China’s “freeze-for-freeze”

Chairman of the Joint Chiefs of Staff Gen. Joseph Dunford reportedly met with People’s Liberation Army officers at the Northern Theater Command in Liaoning near the border with North Korea on a trip that also included stops in Japan and South Korea.

A provocative idea from my Yale colleague Rob Williams, who argues at Lawfare that the U.S. government should take China’s support for a “freeze-for-freeze” deal seriously, but not without adjustment. In the conventional form of the deal, “North Korea would suspend its nuclear and missile testing in return for a suspension of U.S.-South Korean joint military exercises.” Instead, the U.S. government might consider a “freeze-plus-pressure” maneuver in which the United States and South Korea would promise not to hold the next scheduled joint exercises if both North Korean adherence to a freeze and measurably stronger Chinese pressure start now.

#USChinaWeek1967
‘Romney Bids U.S. Encourage China: Calls for Flexible Position on Her U.N. Admission’

“ANN ARBOR, Mich., Aug. 18[, 1967] — Gov. George Romney told the International Congress of Orientalists tonight that ‘it would be in the common interest for mainland China to enter into the community of nations and accept the responsibilities which that entails.’ In a speech at The University of Michigan, he said that ‘the possibility of such a change may appear remote, but we should spare no reasonable effort to encourage it. Mr. Romney recommended the following courses of action: ‘Unyielding support for continued United Nations membership for Nationalist China’; ‘Strong international encouragement’ for Communist China to end her isolation; ‘Clear recognition that Communist China must accept the responsibilities of membership in a spirit consistent with the principles of the Charter before admission.'”

(Source: The New York Times. This entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

]]>http://transpacifica.net/2017/08/u-s-china-week-trumps-tech-and-ip-trade-investigation-bannon-out-after-china-interview-north-korea-2017-08-21/feed/0U.S.–China Week: Trump trade action, ‘fire and fury,’ AI, FONOP, industrial policy, Kushner (2017.08.14)http://transpacifica.net/2017/08/u-s-china-week-trump-trade-action-fire-and-fury-ai-fonop-industrial-policy-kushner-2017-08-14/
http://transpacifica.net/2017/08/u-s-china-week-trump-trade-action-fire-and-fury-ai-fonop-industrial-policy-kushner-2017-08-14/#respondMon, 14 Aug 2017 22:33:47 +0000http://transpacifica.net/?p=1992Welcome to Issue 108 of U.S.–China Week, back after two weeks off and publishing from my new home base in Oakland, California. Much has happened in the last three weeks, and it would be impossible to cover it all in depth. This issue therefore comes in a lively rundown of recent events and ideas.

Welcome to Issue 108 of U.S.–China Week, back after two weeks off and publishing from my new home base in Oakland, California. Much has happened in the last three weeks, and it would be impossible to cover it all in depth. This issue therefore comes in a lively rundown of recent events and ideas.

Intellectual Property and Tech Trade: After two weeks of hinting and delays, President Donald Trump signed an “executive memorandum” that was expected to direct the U.S. Trade Representative to determine “whether to investigate any of China’s laws, policies, practices or actions, that may be unreasonable or discriminatory, and that may be harming American intellectual property, innovation or technology.” USTR Robert Lighthizer said in a statement they would “engage in a thorough investigation and, if needed, take action to preserve the future of U.S. industry.”

This move sets the stage for an investigation under Section 301 of the 1974 Trade Act, which may result in trade retaliation inconsistent with WTO rules. Commerce Secretary Wilbur Ross wrote in an FT op-ed that “the American patent system and the American genius it protects are under serious attack. … China is a primary culprit.” Ross claimed more than 3 percent of U.S. GDP is lost to “theft, piracy, and espionage,” and additionally highlighted Chinese acquisition of IP-holding U.S. firms.

Trump’s announcement, which had been previewed Friday night when he spoke with President Xi Jinping and reportedly told him the action was coming, has been overshadowed in U.S. media by controversy over the president’s reluctance to condemn white supremacists who staged a rally in Virginia Saturday. The announcement was reportedly delayed, too, amidst U.S.–China interactions over North Korea, but an unnamed official told reporters Saturday that trade and North Korea “are totally unrelated events.”

New Sanctions and ‘Fiery’ Rhetoric on North Korea: China’s government on Monday issued new bans on importing North Korean coal, iron, and seafood to implement a new UN Security Council resolution that targeted the DPRK’s nuclear and missile programs. The new sanctions were celebrated by some as evidence of U.S.–China cooperation, but others noted that the measures avoided further scrutiny on Chinese entities that do business with North Korea. The U.S. government also reportedly backed away from threats of unilateral sanctions on Chinese banks that deal with North Korea, with one diplomat telling Reuters such forbearance “played an important role to get China on board.” If so, Chinese cooperation in pressuring North Korea’s government must be seen as limited, if it was only secured by surrendering another means of pressure.

Trump meanwhile implicitly threatened nuclear war if North Korea takes unspecified actions, saying, “North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen.” This statement was followed by a North Korean government statement that it was “carefully examining” plans to launch missiles at Guam. This arguable threat was not followed by “fire and fury. Ankit Panda and Vipin Narang have the best concise analysis of the deterrence implications of such bombast that I have seen.

The U.S. government has other messengers. Chairman of the Joint Chiefs of Staff Gen. Joe Dunford is in China, and Secretary of Defense Jim Mattis and Secretary of State Rex Tillerson published an op-ed Sunday with a much more calibrated message claiming “strategic patience” is being replaced by “strategic accountability.” As former Defense Department official Abe Denmark noted, however, their approach “does not differ greatly from the Obama strategy.” Meanwhile, Former Obama Asia adviser Jeff Bader argued for deterrence and containment as an approach to North Korea.

The Economistpublished an analysis describing potential downsides of China’s approach to AI development. Elsa Kania wrote for Lawfare on dual-use and military aspects of Chinese plans. And Lorand Laskai at CFR offered context on industry and social developments.

Sogou, the Sohu- and Tencent-owned search company, was reportedly to focus on AI as it moves toward a U.S. IPO. Then again, as one China tech industry expert remarked during my recent trip, anyone wishing to impress Wall Street right now might want to hint at AI initiatives, even if they’re never likely to amount to anything.

A U.S. Navy destroyer conducted a “freedom of navigation” operation (FONOP) Thursday near Mischief Reef in the South China Sea’s Spratly Islands, U.S. officials told Reuters. The news of the operation, conducted by the USS John S. McCain, marks another anonymous public revelation of such a U.S. operation. I detect nothing new in the Ministry of Foreign Affairs language responding to the maneuver, but it is possible the U.S. and Chinese governments are settling into a kind of routine with these events. It is hard to tell, though, whether China’s reaction would have achieved higher volume if North Korea and trade tensions were not loudly dominating the U.S.–China geopolitical story.

Earlier, Bill Hayton provocatively but convincingly argued that the U.S. government has surrendered influence in the South China Sea by allowing Vietnam to be pushed away from plans to extract energy from waters China claims for vague reasons but Vietnam claims using international law–supported maritime zones.

Apple was criticized for removing VPN apps from its Chinese app store amidst new Chinese government statements about restricting use of the technology, which many use to circumvent internet censorship. As I told WSJand AFP, the uncertain extent of the VPN restrictions raises questions about future access to the global internet for both Chinese and international business. While it is very unlikely all VPN access will be eliminated, businesses, travelers, and Chinese who depend on blocked information services will likely face a more expensive and more government-monitored set of options if the current restrictions continue.

Taking stock of Apple’s move, Emily Parker argued among other things that “bending to China’s will doesn’t guarantee success” in the Chinese market.

Amazon cloud services customers in China were also told to delete tools that use the Amazon system for VPN purposes, WSJreported, with an Amazon spokesperson saying their Chinese partner “is responsible for ensuring that its customers in China comply with local laws.”

NYTreported that Facebook approved a Chinese app that closely resembles the company’s Moments app, possibly in an attempt to enter the Chinese market through a side door, despite the fact that Facebook is blocked in China. An executive of the company behind the Chinese app appeared in a photograph from a meeting between Facebook representatives and Cyberspace Administration of China officials in Shanghai. Quartz reported, however, that the Facebook-linked app “Colorful Balloons” is far from a hit among Chinese app users.

A U.S.–China cyberspace dialogue channel adapted from prior engagements following the Trump-Xi meeting in Florida has not held its first meeting, Tillerson said, but he said they “hope” to hold the first meeting of the law enforcement and cybersecurity dialogue “in the next several weeks.”

More good tech and industrial policy reads:

David Barboza described Qualcomm’s years of efforts to succeed in China and its bargaining with China’s government.

As White House adviser and Trump son-in-law Jared Kushner prepares to travel to China with Ivanka Trump (where Jim Mann expects them to encounter tried and true official Chinese flattery), New York federal prosecutors reportedly sought records from the Kushner family business regarding its use of the EB-5 visa program, through which non-citizens can gain permanent residency through investments. The company’s use of Kushner’s name and his White House role in marketing to potential Chinese investors was previously reported.

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

]]>http://transpacifica.net/2017/08/u-s-china-week-trump-trade-action-fire-and-fury-ai-fonop-industrial-policy-kushner-2017-08-14/feed/0U.S.–China Week: No new deals after 100-day econ. talks close (2017.07.24)http://transpacifica.net/2017/07/u-s-china-week-no-new-deals-after-100-day-econ-talks-close-2017-07-24/
http://transpacifica.net/2017/07/u-s-china-week-no-new-deals-after-100-day-econ-talks-close-2017-07-24/#respondTue, 25 Jul 2017 01:02:45 +0000http://transpacifica.net/?p=1986Welcome to Issue 107 of U.S.–China Week, sent from Shanghai, with Shenzhen and Hong Kong on the agenda for this week. Due to vacation, publication will pause for two weeks, returning August 14.

The first meeting of the Comprehensive Economic Dialogue, a Trump-era rebrand of the economic track of the defunct Strategic and Economic Dialogue, took place over one day in Washington last week. The Chinese delegation was led by Vice Premier Wang Yang, with Vice Finance Minister Zhu Guangyao also reportedly in attendance, and the U.S. delegation included (according to AP) Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, Federal Reserve Chair Janet Yellen, U.S. Trade Representative Robert Lighthizer, and presidential son-in-law and White House adviser Jared Kushner. Mnuchin also acknowledged White House adviser Gary Cohn and Transportation Secretary Elaine Chao during his opening remarks.

WaPo reported that, in the end, planned news conferences were cancelled, providing a quiet end to any anticipation that further outcomes would emerge from the “100-day” accelerated trade negotiation plan. “The United States unsuccessfully pressed China to make a substantial commitment to cut its steel production,” WaPoreported. WSJ‘s account said the U.S. side “tried, unsuccessfully, to use the threat of new steel tariffs to force the Chinese to commit” to specific capacity cuts. It also reported that negotiators had hoped to “announce some kind of accords on Chinese regulation of data at multinational companies…easing restrictions on foreign auto makers, curbing Chinese agricultural subsidies,” as well as steel. Ross and Mnuchin’s statementfollowing the meeting indicated no such substantive outcomes, but did mention two more names of Americans present: Agriculture Secretary Sonny Perdue and Ambassador to China Terry Branstad. The only moderately concrete reported outcome was that the U.S. statement said China “acknowledged our shared objective to reduce the trade deficit,” and a Foreign Ministry spokesperson said, “The two sides also agreed to cooperate constructively on narrowing trade deficits.” The Xinhua readout of the meeting cast the talks in typically positive terms, but was vague in describing results, saying “some consensus” was reached in several economic areas.

ANALYSIS: The dominant U.S. media meme on these talks was that the “honeymoon” is over between Trump and China. It’s frankly strange to view the banalities of a rearranged dialogue structure and a few pre-baked trade announcements over the last 100 days as a honeymoon. The most honeymoon-like element of the early Trump administration’s China relationship was the misplaced strategy of asking nicely and expecting China’s government to upend years of strategic thinking to impose sufficient economic pressure on North Korea to produce a significant change there. As before, Chinese strategists are certainly unhappy with the Korean Peninsula situation, but they also view pressure that might result in regime collapse or lashing out as unwise. Perhaps Trump was on a honeymoon, with unrealistic expectations, but China was at best treading water nervously, awaiting the moment Trump would realize moderately increased pressure wouldn’t change the situation.

As for trade and economics, the outcome statements from the two governments give the impression of a Chinese bureaucracy striving for normal appearances (with a laundry list of sectors discussed and repeated acknowledgement of previous meetings) while the U.S. team saw no need to meet their counterparts halfway. For those favoring a new, tougher stance against Chinese industrial policy, the apparent stalemate out of this meeting—denying the Chinese side the appearance of agreement without substantive change—could signal the potential establishment of a new approach for negotiation. A shock to the bilateral economic diplomacy system may not be all bad. But U.S. observers should look for clarity and appropriate purpose before praising any shake-up. The S&ED was already criticized for having too many cooks in the kitchen. Bringing five cabinet members, two politically complicated White House advisers, and the Fed chair to the meeting hardly ensures clarity of purpose. And if this week’s meeting really fell on the overcapacious sword of China’s steel production, this was a misguided test issue. No amount of steel adjustment will bring jobs back to broad swathes of the United States; a hypothetical disappearing trade deficit will not modernize the U.S. education system; and beef exports negotiated in the last administration won’t help more than a few communities. In other words, even if the Trump team achieves what they say they’re after, their constituents won’t be markedly better off.

SECURITY + INVESTMENT
It’s not just government barriers stopping U.S. tech in China; CFIUS said to have recommended against nine deals this year

“The big internet companies just don’t have much of a hope here,” James McGregor told NYT in a story about the barriers to success, both government and market, foreign tech companies find in China. The story is valuable for highlighting that it’s not just regulatory burden and censorship getting in U.S. companies’ way, though those certainly matter. As Mark Natkin said, “It may not be so much that LinkedIn is having trouble in China because they’re a foreign company. It’s more that they’re having trouble in China because this is not the model people want to use here.”

U.S. regulators, meanwhile, are reportedly increasing scrutiny of Chinese investments in U.S. companies. The interagency Committee on Foreign Investment in the United States (CFIUS) has recommended blocking “at least nine acquisitions of U.S. companies by foreign [not just Chinese] buyers so far this year,” Reuters reported. Meanwhile, a Ministry of Science and Technology-linked State Council document (about which I and colleagues have forthcoming analysis) laid out goals to make China a leader in a wide variety of artificial intelligence-linked technologies over the coming years. The strategy is sure to add fuel to U.S. concerns that Chinese tech ambitions are state-backed and potentially linked to national security.

“CAMBRIDGE, Mass., July 17[, 1967] (AP) — A former White House aide said today that a high-level Government consensus to shift the United States attitude toward United Nations membership for Communist China was stalled by timing and Secretary of State Dean Rusk. James Thomson Jr., a professor at Harvard who was a special assistant to McGeorge Bundy when Mr. Bundy was an assistant to the President, said Mr. Rusk ‘desired to wait and see and then decided to talk to Taiwan himself, and then felt time was too short.’ Mr. Thomson said a 1965 United Nations vote on Chinese representation, which went 47 to 47 with 20 abstentions, generated Adminsitration discussions. He said the specific direction of a new China policy ‘was not altogether clear, but perhaps it was for the dual representation arrangement or some sort of successor state.’ The State Department refused to comment on Mr. Thomson’s remarks. Mr. Thomson, talking at a three-day conference on China policy, indicated that a key problem was how to broach the new policy to President Chiang Kai-shek of Nationalist China. Mr. Thomson said that, by the time Mr. Rusk talked with Taiwan officials, it was summer of 1966. By September, Red Guard violence indicated it was ‘not the time to move on with the two-China issue.'”

(Source: The New York Times. This entry is part of an ongoing feature of U.S.–China Week that follows U.S.–China relations as they developed in another era of change and uncertainty, 50 years ago.)

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of the Paul Tsai China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. He is also a fellow for China and East Asia with the EastWest Institute. His website is gwbstr.com.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).